What is electricity deregulation and what is its significance?



  1. 0 Votes

    Electricity deregulation is the act of allowing multiple electric companies to provide the critical energy to homes everywhere, instead of just one state or citywide monopoly.  The result of this lowers energy costs, which is always a relief.

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    While electricity deregulation can benefit people through allowing multiple companies to compete for the individual user, the downsides of electricity deregulation must be considered. First of all, electricity rates have gone up in states that have implemented deregulation, according to a 2004 study by the Cato Institute. Many utilities in deregulated states have not encouraged residential customers to switch utilities because it is unprofitable for them. The electricity infrastructure in the US also may not be strong enough to handle the increased energy use that may be brought on by energy deregulation. There are also no incentives for maintaining the existing energy infrastructure.  

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    Deregulation of the electric industry is the process of removing rules and regulations surrounding its operation and supply of power.  While deregulation was sought to foster competition among providers, many problems followed in states who attempted to deregulate.  Merriam-Webster further explains the history of the concept:

    “Congress passed the Public Utility Regulatory Policies Act in 1978. This act opened wholesale power markets to non-utility producers of electricity, creating the foundation for electricity deregulation. With the Energy Policy Act of 1992, congress tried to promote greater competition in the bulk power market. Through this act, states were allowed to restructure their electric power industry to create more competition. As states across the nation adopt deregulation, they are experiencing varied amounts of success.”

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